Forest produce extraction rights treated as a taxable licence; royalty counted as sale price and accrued tax liabilities survived.

A forest produce extraction agreement was treated as a licence rather than a lease where the grantee's rights were confined to entering forest land, cutting and removing bamboos, and appropriating them. On that basis, the transaction was capable of attracting sales tax on the severed goods. The minimum royalty was treated in substance as the sale price because nomenclature was not controlling and the payment represented consideration for the right to cut and carry away the produce. The State could still enforce tax liability despite earlier departmental assurance, and accrued sales tax liabilities survived repeal, lapse, or procedural defects in the Bihar tax enactments and ordinances.

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Issues: (i) whether the agreement for exploitation of bamboos created a lease of immovable property or a licence to enter the forest, cut and remove bamboos, and whether the transaction attracted sales tax; (ii) whether the minimum royalty could be treated as the sale price for levy of sales tax; (iii) whether the State was estopped from demanding sales tax for the earlier period; and (iv) whether sales tax liability could be enforced notwithstanding the repeal and lapse of successive Bihar sales tax enactments and ordinances.

Issue (i): whether the agreement for exploitation of bamboos created a lease of immovable property or a licence to enter the forest, cut and remove bamboos, and whether the transaction attracted sales tax.

Analysis: The decisive test was the true character of the arrangement. The rights conferred by the agreement were to go upon forest land, cut and remove bamboos and appropriate them, while the land-entry rights were merely ancillary to that commercial purpose. A similar agreement had already been construed as a licence, and the Court followed that view. Once the arrangement was treated as a licence for extraction and removal of bamboo, the transaction was capable of attracting sales tax on the goods severed and removed.

Conclusion: The agreement was held to be a licence and not a lease of immovable property, and the transaction was liable to sales tax.

Issue (ii): whether the minimum royalty could be treated as the sale price for levy of sales tax.

Analysis: The Court applied the settled principle that nomenclature is not controlling and that, in substance, royalty paid under such an arrangement represents the consideration for the right to cut and carry away the forest produce. The fact that royalty remained payable even in a year of no extraction did not alter the legal character of the payment where the contract conferred a right to sever and remove bamboo. The amount described as royalty was therefore treated as the price for the taxable transfer of the goods after severance.

Conclusion: The minimum royalty was held to be the sale price for purposes of sales tax, and the levy was upheld against the assessee.

Issue (iii): whether the State was estopped from demanding sales tax for the earlier period.

Analysis: The plea rested on an earlier departmental communication that tax was not payable. The Court held that liability to tax arises from the charging provision of the statute and not from any prior intimation by the department. Promissory estoppel cannot be invoked to defeat a statutory obligation or prevent the State from enforcing a tax imposed by law. Consequently, the alleged assurance could not bar recovery of tax otherwise lawfully due.

Conclusion: The plea of promissory estoppel was rejected, and the demand for tax was sustained.

Issue (iv): whether sales tax liability could be enforced notwithstanding the repeal and lapse of successive Bihar sales tax enactments and ordinances.

Analysis: The Court examined the repeal and saving provisions of the Bihar sales tax ordinances and the effect of their expiry under the Constitution. It held that expiry of a temporary ordinance is not the same as repeal so as to attract the general clause on revival, and that the savings provisions preserved accrued liabilities and remedies. The legislative scheme showed an intention to keep the tax law and accrued liabilities alive, and subsequent validating legislation cured any lacuna created by failure to notify the commencement of some ordinances. Article 265 posed no bar because the liability arose under valid law during the relevant periods, and the later procedural gaps did not extinguish accrued tax obligations.

Conclusion: The contention that no enforceable sales tax law existed during the relevant period was rejected, and the demands were upheld.

Final Conclusion: The writ petition failed on all substantive grounds. The Court sustained the impugned sales tax demands and refused interference.

Ratio Decidendi: In a forest produce extraction contract, where the grantee is authorised to enter land, sever and remove standing produce for consideration, the arrangement is a taxable licence and the consideration described as royalty is the sale price; accrued tax liabilities survive repeal or lapse where the statute or validating legislation preserves them, and estoppel cannot defeat statutory tax liability.

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